Car finance agreements can often last several years, and it’s understandable if you decide you’d like to sell your car before the end. People often ask whether you’re able to and how difficult it is to do so. In short, yes, you can sell your can that has outstanding finance, but there are a few more things to consider. The biggest hurdle is that, when you have a car on finance, you technically do not own the car until the finance agreement has been paid in full. Read on as we discuss how to sell a car with finance on it.
One thing to note before we begin is that a car on finance is harder to sell than a car you fully own outright. People often don’t like the idea of buying a car with outstanding finance because they assume the finance agreement will become their problem. This isn’t the case, as we’ll discuss in due course, but it’s still a factor in the mind of a prospective buyer. It’s also impossible to hide this fact (as well as being shady) because your car will be listed on HPI’s and Experian’s vehicle check databases as having outstanding finance.
The first thing to do is notify your lender of your intention to sell the car. You’ll also need to ask them for a settlement figure, which is essentially how much there is left to repay on your car loan. It’s rare, but some lenders may not allow you to sell, so it’s important to check this with them. In some situations, there may be an additional early settlement fee.
The next thing to do is get your car valued. This will give you an indication of how much you can expect to make from the sale. Ideally, the valuation will be higher than the settlement figure, in which case you’d simply be able to use the money from the car sale to pay off the rest of your car finance. If your valuation is lower than the settlement offer, then you’ll need to pay the difference. In most cases, you’ll be given a window of time to pay this amount – it’s extremely unlikely for your lender to demand immediate payment, especially if it’s a sizable amount to be paid.
This is generally how you would go about selling a car on finance, but there are some small variations depending on the type of finance agreement you have.
With a hire purchase agreement or a personal contract purchase (PCP), you don’t own the car until the finance is fully paid off. Until that point, the lender is the legal owner. This is because the lender buys the car for you, and the finance agreement is essentially you repaying them for doing so.
Therefore, you need to end the finance agreement early in order to be able to sell the car. There is usually a voluntary termination clause. If you trigger this, then you have the option to return the car to your lender if you’ve managed to pay off 50% of the entire amount you owe. This means the amount you borrowed, plus interest and the balloon payment (the latter applies to PCP specifically). If you haven’t reached the 50% mark, then you can either wait until you reach this point with your monthly repayments or pay the difference immediately. At this point, the car is returned to the lender, you no longer have to pay anything, and your finance agreement is over.
A personal loan works a little differently. Instead of the finance provider buying the car for you, the loan is given directly to you, and you buy the car yourself. As such, neither the loan nor the lender is connected to the car. Your repayments are simply paying back a normal loan and you are the legal owner of the car. This means that you are at liberty to sell the car when you see fit. You are still liable for paying back the loan, but the restrictions on the car are nonexistent. In most cases, people will use the money earned from the car sale to pay off a large portion of their personal loan.
If you would like more information on changing or amending your car finance agreement, get in touch with our team now. We have a panel of expert lenders who have experience with all aspects of car finance and we’d be happy to help. Alternatively, explore our blog to find answers to any other car finance questions you may have.